EDITORIAL-A bold and essential move by BRICS

16 July 2014 06:30 pm Views - 2974

The BRICS nations -- Brazil, Russia, India, China and South Africa -- yesterday announced the creation of a US$100 billion bank and an emergency reserve fund.
The BRICS bank and the reserve fund would be major competitors for the World Bank Group and the International Monetary Fund as they have been structured to mirror the functions of the two global lenders.

Emerging economies have always complained about Western bias of these institutions, which were controlled and funded by Western powers and the lack of enough voting rights for developing countries.

According to foreign news reports, the initial capital of the BRICS bank would be US$50 billion and it will be split among the five nations equally. The emergency reserve fund, which was announced as a “Contingency Reserve Arrangement”, will also have US$100 billion and will help developing nations avoid “short-term liquidity pressures, promote further BRICS cooperation, strengthen the global financial safety net and complement existing international arrangements”.
The media reports said the new development bank will be headquartered in Shanghai and the first President will be an Indian.




According to some, this could be the most progressive measure taken by BRICS to date. The need for an alternative to the World Bank and the IMF has been a long-felt need. Despite the mandate of these institutions was to alleviate poverty and help the countries which are in trouble, they have been operating as promoters of neocolonialism. A number of South American and East Asian countries had to go through unimaginable hardships because of their seemingly pro-development but in reality imperialistic policies imposed upon these countries. It was clear that the policies of the World Bank and the IMF -- at least initially -- were to usurp the natural resources of the developing nations by destabilizing their economies and political structures.  

Bestselling author John Perkins in his two books -- Confession of an Economic Hit Man and the Secret History of the American Empire -- vividly elaborates how the so called pro-development bodies such as the World Bank and the IMF operated and helped powerful Western nations to plunder the natural wealth of poor countries through the burdening of wrong economic policies on them and making sure that those countries were indebted to the hilt, so they can never come out of the vicious cycle.

In this context, the formation of an alternative development bank and an emergency reserve fund is extremely important to minimize the imbalances in the global funding arena. The two institutions will compete with the World Bank and the IMF in providing funding and development lending to poor nations and it will provide these countries with more options and benign conditions when it comes to obtaining lending facilities.

In a broader context, this signals that the development lending cartel held by the Western powers for the longest time is now broken and a new world order surrounding the BRICS countries are in the making.